Committee Hearing, March 8, 2005

COUNCIL OF THE CITY OF PHILADELPHIA COMMITTEE OF THE WHOLE FY '06 OPERATING BUDGET - - - - Room 696, City Hall Philadelphia, Pennsylvania Tuesday, March 8, 2005 10:25 a.m. - - - - BILLS 040767, 040789, 050001, 050002, 050003, 050007, 050008. RESOLUTION 050022. PRESENT: COUNCIL PRESIDENT ANNA C. VERNA COUNCILWOMAN JANNIE BLACKWELL COUNCILMAN DARRELL L. CLARKE COUNCILMAN DAVID COHEN COUNCILMAN W. WILSON GOODE, JR. COUNCILMAN JAMES F. KENNEY COUNCILMAN MICHAEL A. NUTTER COUNCILWOMAN BLONDELL REYNOLDS BROWN COUNCILMAN FRANK RIZZO COUNCILWOMAN MARIAN B. TASCO - - - - V A R A L L O Incorporated Litigation Support Services Eleven Penn Center 1835 Market Street, Suite 600 Philadelphia, Pennsylvania 19103 215.561.2220 215.567.2670 274 I N D E X WITNESS PAGE VINCENT JANNETTI, Finance............ 275 ANTHONY JOHNSON, Finance............. 278 MICHAEL WILLIAMS, Finance, MBEC...... 283 CANDACE HITCHCOCK, MBEC.............. 287 NANCY KAMMERDEINER, Revenue.......... 329 JOHN NACCHIO, City Treasurer......... 421 275 03/08/05 - FY '06 OPERATING BUDGET

Good morning, everyone. This is a continued public hearing of the Committee of the Whole regarding Bill Nos. 050003, 050002, 050001, 040789, 040767, 050007, 050008, and Resolution 7 No. 050022. Before we start our hearing, I would like my colleagues to note that tomorrow's schedule has been changed just a little. At 10 o'clock we will hear from City planning rather than the Procurement Department, and at 1:45 Procurement will be scheduled. Our first witness this morning is the Finance Director. Good morning.

Good morning, Madam President.

Kindly identify yourself for the record and proceed with your testimony.

Good morning, I am Vince Jannetti the acting Director of Finance. I'm here on behalf of the employees of the Office of the Director of Finance to provide 276 03/08/05 - FY '06 OPERATING BUDGET testimony on the Department's proposed FY '06 Operating Budget. With me are finance representatives who are available to answer your questions. The Office of the Director of Finance's Fiscal 2006 budget for all funds totals $1.1 billion. The largest single component of the all funds budget is the employee fringe benefits budgeted at 838.9 million. This represents a 57.1 million or 7.3 percent increase over the current FY '05 projection. This change is due to continued increases in pension and healthcare costs. The General Fund budget request is 907.6 million. The General Fund share of employee fringe benefits totals 754.5 million. Other significant elements of the finance budget are the Core Scholarship Program, legal services, witness fees, contributions to educational organizations and indemnities. This budget includes a contribution to the Community College of $22.5 million and a $35 million contribution to the School District. 277 03/08/05 - FY '06 OPERATING BUDGET The office of the Director of Finance is comprised six divisions: Executive Direction, the Office of Budget and Program Evaluation, Minority Business and Enterprise Council, the Accounting Bureau, the Office of Administrative Review and Risk Management. The proposed direct appropriations in Fiscal '06 General Fund for the Office is $18.3 million, which is a decrease of $697,500 from the current year projection. This decrease is the result of a 3 percent reduction in personnel services necessary to maintain a balanced budget. This budget anticipates 154 full-time General Fund positions, a decrease of five position from the FY '05 adopted budget level. Other departments, boards, and commissions under the direction of the Office of the Director of Finance will provide separate testimony. I'm happy to answer any questions you may have at this time.

Thank you 278 03/08/05 - FY '06 OPERATING BUDGET Mr. Jannetti. You mention in your testimony that the City's pension payment is one of the fastest growing components in our budget. Can you state for the record why this is increasing? And would you also state for the record what the minimum municipal obligation is? And isn't it true that by paying the MMO, you're allowing the accrued unfunded liability to grow, therefore, ensuring the City's future payments will increase? Good morning. Please identify yourself for the record.

Good morning. I am Anthony Johnson, Chief Investment Officer of the City's Pension Fund. At the time, I do not have the dollar figure for MMO. I will furnish that to you as soon as possible.

When do you think that would be?

I can get to you tomorrow when we make our testimony for the Pension Fund. 279 03/08/05 - FY '06 OPERATING BUDGET

Fine.

The increase in the pension, the MMO is the minimum amount that the City has to pay in order to meet its obligation for contributions into the Pension Fund. I think historically we have paid over that minimum amount, but I think in the past two years we have reduced that payment down to what the minimum is mandated by the State. I think it's Act 205 that mandated what our minimum would be according to our actuarial calculations. The increase in the costs have occurred because of the low returns that we earned in 2001 and in 2002, creating a larger deficit in the pension plan. That deficit has since been recovered on a returns basis, however, the way the actuaries calculate, the contribution to this Pension Fund, it looked back over a longer period of time, five-year period of time, and over that five-year period we are still including the low returns that we earned in 2001 and 2002 which is creating a larger pension payment into the pension plan.

Can you 280 03/08/05 - FY '06 OPERATING BUDGET tell us, is the accrued unfunded still growing?

The accrued unfunded is still growing. I don't want to guess, but the way the chart is calculated, the pension contribution will grow out for the next five to years and then will start to decline 9 thereafter. But I will get that peak and 10 decline number for you tomorrow.

While you're there, I don't know if you or Mr. Jannetti can answer this. You're requesting $279 million in the General Fund for pensions. How much of this is for the normal cost component versus the accrued unfunded liability?

Madam Chair, we don't have that breakdown. We will provide that also.

All right. And based on the latest actuary report, what is the total of the City's unfunded liability?

We don't have that 281 03/08/05 - FY '06 OPERATING BUDGET report with us. We will have a complete report for you tomorrow.

On 9-17 of your detail, you give a breakdown of your various contracts. Can you tell us who CDR Financial Products, Inc., are and what services they provide?

CDR Financial Products is the City's swap advisor. They advise us on the swaps that we have in place and on proposals for swaps.

And at the same time you're requesting $275,000 for financial advisory services, what services do these firms provide to the City?

Those firms are for more general financial advisory services, looking at opportunities for bonds, helping us with our rating agency presentations. There's a whole host of things they do for us.

Well, do the FAs receive additional compensation from the City by working on the various bond transactions? 282 03/08/05 - FY '06 OPERATING BUDGET

Yes, they do.

And how much do they usually get?

It depends on the transaction.

You're also requesting $300,000 for a benefits consultant and $200,000 for an actual consultant. Can you explain what these requests are for and why they're needed?

We are looking at the City's benefits plans, and so we have to constantly keep on top of these.

Are they, in fact, looking at what we've been hearing about for the last two years about self-insurance?

I don't know that, Madam President. I can find that out.

I think if we're paying that kind of money, we ought to know what we're paying for.

That's true.

Since the 283 03/08/05 - FY '06 OPERATING BUDGET Minority Business Enterprise Council is a component of your budget, what actions have been taken to increase minority participation in City contracts? What percentage of the City's contracts are going to minority firms?

To answer that, I will ask Mike Williams to come to the table.

Good morning. Welcome. Please identify yourself for the record.

Michael P. Williams, Deputy Finance Director and Director of the Minority Business Enterprise Council. Good morning.

Good morning. I think you heard my question?

Yes, I did. For Fiscal Year 2004, the number of contracts going to minority business enterprises was 10.65 percent, and for women-owned business enterprises was 6.03 percent.

And did I 284 03/08/05 - FY '06 OPERATING BUDGET read -- I just saw the headline, but did the Mayor issue a directive this past weekend?

Yes.

I didn't read the paper. Can you spell it out for the record, if you will?

An executive order.

Yes, what is the Executive Order.

The Executive Order is part of the City's anti-discrimination order for contracting. It covers Minority Business Enterprise Council and contracting for minority, women, and disabled-owned businesses in City contracting, City government.

Does anybody has a question on that, or can I go on? You'll be here the rest of the hearing.

Yes, I will be here today and tomorrow.

When will we 285 03/08/05 - FY '06 OPERATING BUDGET get a copy of the Executive Order?

I will send you a copy. I sent a copy to your aid, Derek, but I will go back to my office.

I think it would be nice all had a copy of it. I mean, we have to read the papers what's going on?

Can I continue and just ask a couple questions.

Yes. On this issue?

On this issue. How does this Executive Order compare to the bill he approved in 2003?

The Law Department has created a sheet where it lists the differences and similarities between the Executive Order and the ordinance. And I will talk to the Law Department to get a copy of that over to Council today.

Does the Executive Order call for an annual disparity study? And does the Executive Order call for participation ranges for City contracts being 286 03/08/05 - FY '06 OPERATING BUDGET determined in each year?

It does not call for an annual disparity study, and it does not list a specific percentage amount of contracts through there. It lists aspirational goals and it lists what departments need to do and what MBEC needs to do to increase the number, but it does not list specific percentages in the Executive Order.

How will the Executive Order stand up to legal challenges based on well-established case laws that requires remedies for discrimination to me narrowly tailored?

I think that's probably a question for the Law Department because it's a legal reason. But as an attorney, I feel that it will stand up well. But I think that's a question that the Law Department. They probably can answer better than I can.

Thank you. That's all I have on this issue.

Thank you. 287 03/08/05 - FY '06 OPERATING BUDGET The Chair recognizes Councilman Goode.

Good morning.

Good morning, sir.

I have had the opportunity to read the Executive Order. I pulled it off line this morning. Can you walk me through the benchmarking process?

Yes, sir. I just need a copy of the order.

Good morning, Madam President.

Good morning. Please identify yourself for the record.

My name is Candace Hitchcock, Deputy Director of Operations for the Minority Business Enterprise Council. You asked about the benchmarking process?

That's correct.

It is the setting of an annual goal per department based on the department purchasing procurements for the 288 03/08/05 - FY '06 OPERATING BUDGET upcoming fiscal year. We determine, looking at that your purchasing activity, the opportunities for minority, women, and disabled businesses that might be achieved during the upcoming fiscal year.

I actually asked Mr. Williams to walk me through the process. I know what the benchmarking process is. My question is, at what point do you request those goals? My understanding is those goals have to be approved by MBEC. If they're not approved by MBEC, does MBEC then institute its own goals for those departments? Just walk me through the process in terms of how it will actually take place.

I apologize, Councilman. What we've done, as Candace has already said, is we will review again a department's purchasing processes and their contracting activity. We, last year, sent out the goals around May 1.

I don't want to interrupt you, I just want to make sure we're going through a process step-by-step. Is 289 03/08/05 - FY '06 OPERATING BUDGET there a point in time in each year where you will request benchmarks from each department?

Absolutely. We'll request them in May, a month before the current fiscal year ends in that year and before the next fiscal year. So, for example, for this year, we'll ask for them in May for Fiscal Year '06. So we'll send out the information to them with our benchmarks and then we'll ask them for compliance plans and come back and let us know how they're going to contract.

And you will review those benchmarks to determine whether they're acceptable to MBEC?

Yes, sir.

And how long would that process take?

I would hope that it will not take more than a month to do that because of all the departments and all the give and take we have to do. We will try to get them finished before the fiscal year begins. 290 03/08/05 - FY '06 OPERATING BUDGET

So if you disagree with those benchmarks sent by departments, what happens?

We would go to the Director of Finance and register a complaint with them that we did not accept their benchmarks. The Director of Finance would have to mediate the dispute between our department and the department in question.

So the beginning of each fiscal year, we should, in fact, have benchmarks for each department?

Yes, sir.

And those benchmarks, per the Executive Order, will be shared with Council?

Yes, sir.

Was there a benchmarking process that led toward the numbers achieved for 2004?

There was not, to my knowledge. I wasn't here at the beginning of that fiscal year. No, she said we did not do that. 291 03/08/05 - FY '06 OPERATING BUDGET

The question I'm really asking is -- I've read the Executive Order. I'm pleased with a lot of it covers what was in the bill that Council passed. As a result of passing that bill and increased attention on this issue, seemingly the Administration has gone from 2 percent in contracting minority and women to roughly 16 percent. My question is, how did you get there? Because you didn't get there per Executive Order because there was no Executive Order. So what part of this Executive Order was used to increase contracting with minorities and women?

Well, you're correct, Councilman, an Executive Order wasn't here. I would an imagine that all the attention surrounding this issue, the hearings that Council had, the Executive Order that the Mayor put out, the changes in MBEC starting with hiring me with allowing me to bring enforcement and compliance wing to actually stay on top of departments and to actually start monitoring and meeting with them 292 03/08/05 - FY '06 OPERATING BUDGET quarterly, I think that put the attention on that. And with all this collaborative effort, city departments heard loudly and clearly that they have to do more minority contracting. And not only to give minority contracting on subcontracts, but to also to give opportunities for minorities and women to become prime contractors.

So the Mayor has now set a goal of at least percent for 12 minorities and women by 2006; is that correct. 13

Yes, sir. 14

At what point and 15 how do we reach that goal? In addition to the 16 individual departments benchmarks at the 17 beginning fiscal year or, I think, per the 18 Executive Order every six months, there is 19 some overall benchmarking process? 20

Every six months, we 21 will compile the statistics from minority, 22 women, and disabled-own contracting and 23 present them to the Administration and to the 24 City Council see how far folks are going. For 25 example, if we get reports that are low in 293 03/08/05 - FY '06 OPERATING BUDGET some departments, we'll be able to go back to them and say, "You need to do more." And at the end of the year, we'll have those statistics and if they don't meet those benchmarks --

Do you anticipate, because an Executive Order only lasts only months and there's reporting 10 every 6 months, do you anticipate every 6 11 months having an overall benchmark that gets 12 you to 26 percent? In other words. If you're 13 16 percent now, do you anticipate 6 months 14 from now you'll be at 18, 19, percent; 15 after 6 months you'll be at 22 percent; after 16 that you'll be at 26 percent by the end of the 17 18-month period? Is there an actual -- how do 18 you actually get to 26 percent through the 19 benchmarking process? 20

Well, I think if you laid it out there, sir, we have to look at what contracting we have, look at the level where we are right now. Right now, our mid-year percentage for 2005 is roughly 9 percent for minority contracting and about 6.5 294 03/08/05 - FY '06 OPERATING BUDGET percent for women contracting. So we'll have those numbers. We'll go back to the departments. We have all their statistics. We'll go back and say, "Well, this is where you are now and this is the goal we thing we need to be based on your contracting and based on your history.

I guess the question I'm asking is, how often do you revisit that? In other words, is there an actual goal of overall benchmarking set for the new fiscal year?

There is not an overall goal except what the Mayor --

There's just the goal of percent at some period at the end 18 of 2006 and there's nothing in between here 19 and that future point yet? 20

Well, from the 21 Mayor's speech and what I gleaned from the 22 Mayor's speech is that at some point at the 23 end of his administration, he wanted it at a 24 certain number. So that he didn't lay out a 25 plan for us to get there, but I think through 295 03/08/05 - FY '06 OPERATING BUDGET the Executive Order and what we have in place right now will get us to that goal.

Why doesn't the Executive Order go beyond September 2006?

The Law Department drafted that, sir, and I think that has to be, respectfully, a question for them.

Because seemingly, the Executive Order would end before the goal would be reached.

I understand that.

If there's no 14 goals between now and then, the Executive Order actually expires September 2006. The Executive Order could literally expire without ever reaching the stated goal.

Well, the Executive Order will expire it, but as reading it, it can be reauthorized. And, hopefully, at that time, it will be reauthorized.

I guess essentially what I'm saying is you never reach the percent before the Executive Order 25 expires. That doesn't necessarily make any 296 03/08/05 - FY '06 OPERATING BUDGET sense if you don't set any goals between now and the expiration date of the Executive Order.

Well, I apologize, Councilman. All I can really say is that the Mayor had made this pronouncement, and we understand what those numbers are, and we at our department will try to work with the departments to reach that goal. I think that's the only thing I can say to you.

Do you believe that there should be some goal set before the percent goal at the end of 2006? 15

Well, I think that 16 you can't set any specific goals -- I think 17 this is a question for the Law Department. I 18 think you can't set specific goals because it 19 would bring us out of line with some of the 20 court cases that say you can't set anything 21 specific. I think that's the law is, but I'm 22 not sure. 23

The Mayor did, in 24 fact, set a 25 percent goal. 25

I think what the 297 03/08/05 - FY '06 OPERATING BUDGET Mayor had said is his aspiration was to actually do that, but I didn't think that he had commanded a percent goal. That may be 5 just my interpretation of that. 6 Nevertheless -- 7

Where did the 25 8 percent number come from? 9

I have no idea, sir. 10

Thank you. 11 Thank you, Madam President. 12

You're 13 welcome. 14 The Chair recognizes Councilman 15 Rizzo. 16

This is to the 17 Finance Director, please. 18 I know this isn't your specific area 19 of responsibility, but since it's a financial 20 issue, I'd appreciate you assisting this 21 Committee and getting the information to the 22 Chair that I need. With all this conversation 23 about wireless networks, I started to look 24 through some files and did a little bit of 25 research. In the Year 2000, a company called 298 03/08/05 - FY '06 OPERATING BUDGET Metrocom installed, not just in Philadelphia but through the suburban areas, a wireless network. The assets of that company were acquired by a company call Ricochet. I spoke with one of the executives there that tells me that we spent over a million dollars on this network that has been abandoned in place. That is not a good situation. There are 4,000 units that have been installed to light posts, not just in Philadelphia but in suburban communities, that are ready to be switched on. So all this talk about building a wireless network in the City, what's troubling to me is we've spent over a million dollars already. So I'd like to get all of the documents from the Procurement Department, the Department of Public Property, to find out how we could have spent a million dollars plus on a venture and just abandon it. Do you have any knowledge of this transaction?

Councilman, I do not. I will look into it for you and get back to you.

Again, the 299 03/08/05 - FY '06 OPERATING BUDGET company was Metrocom. They went out of business. A company called Ricochet Networks acquired their assets. The executives hearing about this transaction contacted me and informed me within weeks, if the network is still here, that it could be activated with very little difficulty. And we spent, just a ballpark, well over a million dollars.

Okay. I will look into that for you.

Thank you.

The Chair recognizes Councilwoman Blackwell.

Thank you, Madam President. Does the Finance Department make the investment decisions for the Pension Fund, for the city employee Pension Fund.

No, Councilwoman. The investment decisions for the Pension Fund are made by the Pension Board, by the members of the Pension Board with assistance from the investment staff at the Board of Pensions.

Thank you 300 03/08/05 - FY '06 OPERATING BUDGET very much. Mr. Williams, when it is decided how we're going to up those numbers, we certainly want to work with you in that regard and appreciate the opportunity to work with you in various areas as we try to somehow increase women and minority participation.

Thank you so much.

Thank you both. Thank you, Madam President.

You're welcome. The Chair recognizes Councilwoman Tasco.

I have a couple questions. I'd like to go back to Mr. Williams and then come back to the Finance Director. Recently, I believe now the city waste contract is up. And there's a process going on now about the selection of the contract as well as the minority participation. Did MBEC do a compliance 301 03/08/05 - FY '06 OPERATING BUDGET review on that? Are you participating in that process and have you done a compliance review of the bids that have been submitted?

Yes, we have, Councilwoman

You've done a compliance review? With you at the table during the course of the discussion when the bids were submitted for a review by the selection committee?

No, I wasn't. I reviewed the bids that were submitted.

You reviewed the bids for the participation of minorities and women on those contracts?

Yes.

Do you feel there are a sufficient number of companies that are involved in each of the bids?

Not on each of them, but the majority of them were within the ranges that we set.

I was contacted by a vendor -- and maybe int he upcoming 302 03/08/05 - FY '06 OPERATING BUDGET election or new bid ethics rule, I might not be able to work on behalf of my constituents. But I had a constituent contact me regarding the effort to become certified as a DBE and one of your requirements is they must submit their income taxes. And he didn't feel very comfortable with that because he didn't feel comfortable with the security and confidentiality of his records in your office. If he feels that way, it may not be true, but if that is a sense that other people have, what are you doing to assure information provided to your department is kept confidential and secure?

Well, we have locked cabinets for our certification files, and we also have permitted vendors on occasion when they request such that we need to review their information and as it relates to personal tax returns review it information and return it to the applicant. We document in our files that that has been done.

So have you had enough question about the confidentiality and 303 03/08/05 - FY '06 OPERATING BUDGET security of these records to cause people not to comply?

To my knowledge, we haven't had a serious problem with people not complying with the personal financial information. There has been reluctance, be we seem to overcome that. We offer them the alternative, Councilwoman.

So if a vendor chooses to bring their tax returns in and sit with a compliance officer or a review officer, whatever you call them, and go over the return there at that time, they're allowed to do that?

Yes, they are. That does not apply to the unified certification program which we are involved in as well, but that's another process. But under the City's program, we can do that.

What's the unified certification program?

That's the disadvantaged business program that we are a member of the state-wide certification program 304 03/08/05 - FY '06 OPERATING BUDGET for federal projects and federally funded projects. There are two different programs that we operate in the City. And that is primarily because we are a grant recipient of federal funds for the airport and federal highway program.

We were compelled o join the unified certification process. There's five entities in the state. The City --

SEPTA, Allegheny County, PennDOT.

And one more.

That was mandated by the Secretary of Transportation four years ago.

Federal Secretary. So in that process, the vendor has to leave their personnel, confidential information with your office.

Yes, that's part of their requirement.

Who has access 305 03/08/05 - FY '06 OPERATING BUDGET to this information?

The access is to the certification unit that we have in our office, and they are under locked files.

What assurance do they come under to keep this information confidential.

As a participant in the unified certification program, we are bound to sign a confidentiality statement.

Has there ever been a time when someone felt that their information in appropriately distributed to someone that should not have had it?

Not to my knowledge.

Only in my history.

Just wanted to raise the question since it was brought to my attention. Thank you very much. Let me ask the Finance Director a question. In your testimony, you stated that the Finance Department's budget anticipates 154 full-time positions, a decrease of five positions from Fiscal Year '05 budget. 306 03/08/05 - FY '06 OPERATING BUDGET However, in Section 9, of the budget detail the '06 budget request has 163 positions, with the majority of these additional positions in MBEC. Could you explain this?

What page was that, Councilwoman?

In your testimony you talk 154 full time positions, but in Section 9, of your budget detail, it outlines 163 positions, of those positions are going to MBEC.

Councilwoman, the 154 positions mentioned in the testimony was the General Fund. The larger number includes Water Fund and Grants Fund employees.

So the 163 positions in the budget, in the detail --

That's General Fund, Water, Grants. It's all -- we have employees that are funded from other funds.

What about MBEC?

Pardon? 307 03/08/05 - FY '06 OPERATING BUDGET

Is MBEC included in that number?

Yes, MBEC is in that number.

So it's not counted as part of your number of employees?

They're in the 154 count.

In the budget detail, let's look at that, it states that you're going to have 163 positions.

At the top of 9-7? (Pause.)

Charlie explained it to me. Thank you.

Councilwoman, are you finished with your questioning?

Yes.

Thank you. Mr. Jannetti, could you explain the $125 million for purchase of services and the Water Residual Fund?

The 125 million in 308 03/08/05 - FY '06 OPERATING BUDGET the Water Residual Fund is the appropriations for the New River City money, the money that's going to be funded from the Water Sinking Fund Reserve.

Why are these funds in Class 200?

I believe the intent is to use an authority to do the development.

So who will administer the funds?

I don't know at this pointy yet, Madam President, how exactly we're going to do that.

So I guess you can't tell us what Procurement process will be used in awarding the contracts.

Correct. We're not there yet.

You're not there yet. Do you think you'll know before it's budget time to be voted upon?

I think so.

What 309 03/08/05 - FY '06 OPERATING BUDGET revenues are you projecting the General Fund from the scoop in each year of the plan?

From the water?

From the scoop in each year of the plan, from the Water Fund.

In Fiscal '06, we're estimating $3.3 million; in Fiscal 07, we're estimating 2.9; in Fiscal '08, we're estimating 1.9 million; and '09, 1.9; and 1.9 in '10 also.

I don't know whether you or Ms. Reed would be able to answer this question. During the capital hearings, Maxine Griffith testified that the recommended capital spending level is only minimally sufficient to maintain municipal facilities. Can you tell us how many maintenance trade employees we have in the General Fund?

I would have to get back to you with that.

Personally, I believe that with the proper 310 03/08/05 - FY '06 OPERATING BUDGET number of maintenance employees in the City, we would save a lot of money, as deferral maintenance in the long run is just going to cost the City more. I would like you and perhaps Ms. Reed or whoever to look into asking the Administration just if they would look into that and give us their findings before we can conclude our budget process. For instance, I think we have -- I don't know how many roofers we have working for us throughout the City. It's ridiculous. We have to put it out on bid. We have to wait forever. By the time the bid goes out, say, at a recreation center and we experience that in one of our facilities. By the time they got around to dealing with the roof, there were are any number of damages done to the interior of the building. I think if we were to have in-house people doing this type of work would certainly be much more cost efficient, but it's something that I'm asking the Administration to look into and give us a report of their findings before end our budget process, particularly since our Capital Budget 311 03/08/05 - FY '06 OPERATING BUDGET is really shrinking. And if we have to wait until Capital Budget actually stockpiles requests for work that has to be done at some of our facilities, I think we're asking for an awful lot of trouble.

I will look into that, Madam.

Thank you. The Chair recognizes Councilwoman Brown.

Thank you, Madam President. Good morning.

Good morning.

Recently I received a note about the mandatory and voluntary MBEC participation. Can you explain the change and the why?

Councilwoman, I'm saying the voluntary form is used when there are no ranges on the project.

When there are no?

Ranges on the 312 03/08/05 - FY '06 OPERATING BUDGET project. That's the only time I understand Procurement uses that.

So that's instead of mandatory MBEC form or --

The project is listed with no ranges. The voluntary form is to capture any participation that may occur voluntarily so that no amount of participation is missed. It's a project that either is small or does not necessarily lend itself to ranges. And so the voluntary form is in there in case there happens to be a minority or woman or disable business who happens to bid as prime or who happens to be a sub on that project.

So in other words, I think it's an aggressive approach by MBEC to try to go after every part of participation that we can. Some of these smaller projects do not lend themselves to ranges, but we want to put them there any way. So that's the difference.

So it becomes a part of a packet as such and you send out a 313 03/08/05 - FY '06 OPERATING BUDGET packet to folks who want to secure certification with MBEC?

No, it goes out with the bid package.

All right then. The second question, please, actually comes in two parts. How long have you been with us now, Mr. Williams.

Eleven months.

Not quite a year.

Not quite a year.

So if you had to ID three accomplishments so far, please speak to them. Part 2, what are your biggest challenges that you see in the coming year when you consider the priorities that the Administration established and you being on the front line what you see the priorities to be, what are those top three biggest challenges that you see for the coming year? So first speak to 1, 2, and 3 accomplishments, and then 1, and challenges over the next 314 03/08/05 - FY '06 OPERATING BUDGET 12 months.

I think that the first accomplishment that we've had is we actually have made a difference in the numbers. The numbers from disparity study which were well publicized were very, very, I think, embarrassing to everyone involved with this. The fact that we got them up to 10.65 percent Fiscal Year 2004 for minorities and 6.03 women I think is very good. And the fact that we are continuing that trend with our mid-year numbers, about 9 and a half percent for minorities right now and about 6 and a half percent for women businesses at this point in time, I think that's showing that we are moving in the right direction. Secondly, I think that staff has been phenomenal. I've added two units, an enforcement unit and a special projects unit, and they have done some excellent work. They're under some very difficult conditions, not only the fact that even today we still have one of our employees being interviewed by the FBI. So all that kind of activity and 315 03/08/05 - FY '06 OPERATING BUDGET some of the negative publicity surrounding our department and the fact that we're still understaffed. We're still trying to work through the City's to become staffed, but at this point we still are understaffed. The fact that these units and our units and our staff have really worked that hard is just been great and I think the fact that I was able to motivate them to do that, I think has been one of my accomplishment. I think the third has been to work with the Administration and with City Council just to get the word out. I've had a number of Council folks here contact our offices for different situations and have been able to work with them. Councilwoman Tasco, I did call the gentleman back. I just haven't heard from him yet. We were going to give him that answer, just to let you know that. The fact that we're all working, I feel, together to push this as a goal I think has been terrific. So it's really not accomplishment as accomplishment of things 316 03/08/05 - FY '06 OPERATING BUDGET coming out of Council's original hearing, coming from the Administration, and coming from this office to know that there is one goal and this goal is the only acceptable goal. And that message to city departments, I think, is being heard loudly and clearly.

So is that to suggest that you're starting to see some behavioral change, if you will.

I think so. Our enforcement deputy, Wendy Staton, has been meeting with all the departments. And I think overall -- I think that there's some frustration, but overall people are still being able to hear. I don't think that there's no time to not let any pressure off of folks just because of patterns and habits.

There's this expression you have to change the philosophical place of a person before you can get their behavior to change.

Exactly. I think I heard Councilman Goode actually had said that earlier. I remember that statement very well, 317 03/08/05 - FY '06 OPERATING BUDGET that you have to get their heads changed. And sometimes you have to talk with them and kind of negotiate with them. Sometimes you have to bring a club and hit them on the head and keep doing that. But either way, we're equipped to handle whatever situation comes in front of us to move them along.

And so challenges?

The challenges are still to keep people in line. That's what I meant not letting off pressure. I think Council hearings are a great way to ask departments -- not that I'm suggesting that you don't do that, but I think it's a great way to put the folks under a microphone, so to speak. I can't have a Council hearing when I'm talking to folks. But certainly, when you folks ask about the minority participation, it's not like they're going to answer you and then they're going to go away. That kind of pressure, plus the pressure from my department, will keep on them. And I think that's the challenge, you have to keep the 318 03/08/05 - FY '06 OPERATING BUDGET pressure on departments. Another challenge is to talk to the private sector. Their numbers were the same as the City's numbers in that disparity study. I think that the Mayor has done a good job of trying to reach out. But I think, again, in partnership with Council to reach out to the private sector to say we need your numbers to go up to, I think that will be a challenge to get them because we really have no legal authority to do that. But I think we have the moral an authority to do that and that we should. My third challenge, frankly, is to make sure that we're full staffed. I see the Executive Order has been passed out now. And when you look at that, there are actually more duties that MBEC has to undertake. Currently, we have about 15 staff members and 2 people are on the cusp of being hired. We've had our hiring plan approved since last June, but because of just City processes it's taking us a long time to get folks in there. We have a certification backlog that we would like to 319 03/08/05 - FY '06 OPERATING BUDGET get rid of, but we need to get folks in there. So that's really just the department's challenge of getting some good qualified bodies in there so we could actually move along our requirements that are given to us through the Executive Order.

My final question. You say that your numbers have gone up in both MBE/WBE categories. What systemic changes have taken place for that to happen?

I think, again, the systemic changes started at the Council hearings, putting people focus and their attention on this issue. The Administration, I know, has had this as part of what they wanted to do, but I think the Council hearings were the catalyst to getting these done. When I came in, there were some certain goals that I had set for myself and staff, certain systemic changes we wanted to see just in our dealing with departments and what would be acceptable and what would not be acceptable. I think that has caused some ruffled feathers between my staff and certain 320 03/08/05 - FY '06 OPERATING BUDGET departments in the City. I think that whether they be ruffled or not that really isn't my -- I don't want to come to be all hand fisted and hardheaded, but certainly this is our goal and we have to get there. And if feathers need to be ruffled, so be it as long as we do that. I think it the systemic change is because of the attitude, the attitude that this is an important issue to the Administration, to City Council, and to my office. And, again, working in a partnership I think that that goal of just saying that we are all united in moving this along, I think that's a systemic change that's going to make these numbers even grow higher.

Okay. My final question, which you've already addressed, is what is the best way for City Council to further assist you in your mission, which you've already articulated. So that's it for me for now. Councilwoman Marian Tasco discussed the earlier question around the Executive Order and where we are today. And you'll 321 03/08/05 - FY '06 OPERATING BUDGET provide a copy of the order to the Chair?

It was just distributed.

Thank you. Thank you very much, Madam Chair.

You're welcome. Mr. Jannetti, for the record, can you tell who is responsible for issuing City debt? Is it Finance, is it the Treasurer, or is it both?

It's being done out of the Director of Finance Office.

How are the fees associated with issuing the debt paid?

The fees for the various participants in a bond transaction are paid at closing of the bonds from the proceeds of the bonds.

Doesn't this increase the amount of borrowing?

We usually estimate one and a half, two percent for cost of 322 03/08/05 - FY '06 OPERATING BUDGET issuance in a transaction. Yes, it would increase the cost of borrowing, yes.

In the issuance of GO debt does the issuance cost count toward our constitutional debt limit?

Yes, the issuance cost on general obligation bonds is like any other bond, paid out of the proceeds.

And can you tell us why doesn't the City include these costs in the budget?

If they were in the budget, then they would be paid from the operating funds. The issuance cost on the bonds is a part of the cost of providing the funding for the projects.

But wouldn't you think that it would be good public policy to include these costs in the budget so that there would be a record of what it cost the City to issue debt?

It's true that you can't go in the accounting system and see the cost, but the costs are captured. We do have 323 03/08/05 - FY '06 OPERATING BUDGET reports that have the costs for each transaction.

By paying these costs out of bond proceeds, aren't we amortizing the principal and interest costs over 30 years?

Yes. Just as part of the construction funds, the issuance cost, anything paid out of the bonds would be spread out over the life of the bonds.

Thank you. I just wanted that to be part of our record. The Chair recognizes Councilman Goode.

Thank you, Madam President. Good morning again, Mr. Williams.

Good morning.

Can you talk to me about the Greater Philadelphia Economic Opportunity Task Force? I agree that we have to be as vigilant in the private sector as we are in the public sector and perhaps more vigilant 324 03/08/05 - FY '06 OPERATING BUDGET because most of the contracting that is actually in the private sector and the Executive Order talks about the creation of this task force in order to reach that goal. Can you tell me whose idea the task force was? Why are there members? And beyond that, 8 why were those specific types of people chosen 9 for the task force? 10

Sir, I have no idea 11 why the formulation was that way. The Law 12 Department drafted the Executive Order. And 13 although I've had some input into it, I did 14 not have any input into that section. 15

So you don't know 16 whose decision it was to have this Economic 17 Opportunity Task Force and decided issue there 18 be 25 members, but more specifically it lists 19 one representative from each of the following 20 constituencies: It has AFL/CIO and then it 21 has business community as a general term, City 22 Council, colleges and universities, county 23 commissioners -- I don't know what that means 24 and what role they would have in this type of 25 task force -- financial or accounting 325 03/08/05 - FY '06 OPERATING BUDGET institutions, healthcare community, hospitality industry. It seems very generalized. It says, law firms, management consulting firms, non-profit organizations. It doesn't seem to be much thought to who actually should sit on this task force or what specific type of organization should actually be there. It just seems to be a general listing of organizations and saying it should be members. Is there anyone who can 12 enlighten us as to what this task force would 13 look like and what they would actually do? 14

Sir, I think that 15 either someone from the Law Department, 16 probably Michelle Flamer who drafted this or 17 the City Solicitor or someone from the 18 Administration would be able to answer that 19 question for you. 20

Thank you. 21 Mr. Jannetti, are you familiar with 22 the Philadelphia Community Investment 23 Commission? 24

I'm not real familiar 25 with it, Councilman, but I know of it. 326 03/08/05 - FY '06 OPERATING BUDGET

The Philadelphia Community Investment Commission was created through legislation that I introduced in 2000. The Mayor signed a parallel Executive Order creating it as well. It is under the auspices of the Finance Department and it has not held meetings in several years.

I will look into that, Councilman.

Well, you can look into it, but the purpose of that commission was to look at any number of different reinvestment issues, including access to capital and credit for minority and women-owned business. There was a vehicle established essentially over almost five years ago to do that. The Commission has not met. It's not just something that Council wanted to do; the Mayor actually did sign a parallel Executive Order, and nothing have come of it. Council also appropriated $5 million for lending to minority and women-owned businesses. That money was never spent. And I ask that because in the 327 03/08/05 - FY '06 OPERATING BUDGET Five-Year Plan, the economic development portion, the Administration speaks to access to capital and credit for minorities and women-owned businesses, yet there doesn't seem to be this coordination between what's happening with the economic development agencies and department and the Finance Department, and there are any number of different initiatives that are housed within the Finance Department. Has anyone communicated with you about access to capital and credit issues?

No one has up to this point, Councilman.

Are you aware that within the Executive Summary of the Economic Development Blueprint the Administration says it's going to convene a Bankers Task Force.

I believe I recall that, yes.

Did anyone consult you on how that Bankers Task Force should be organized, particularly since you 328 are the person who oversees the City Treasurer's Office which oversees the City depositories relationships.

No, that has not been discussed yet, Councilman.

Thank you. Thank you, Madam President.

You're welcome. Are there any other questions from Members of the Committee of these witnesses? (No response.)

Thank you all so very much. The Committee will stand in recess until 1:45, at which time we will have the Revenue Department testify. Thank you. (Council in recess at 11:30 a.m.) - - - - (Council resumed at 2:00 p.m.)

Good afternoon. This is our continued public hearing. I would ask the Revenue Commissioner to please come up to the witness table, 329 identify yourself, and proceed with your testimony. Good afternoon. COMMISSIONER KAMMERDEINER: Good afternoon, President Verna and Members of City Council. I'm Nancy Kammerdeiner, Revenue Commissioner. With me this afternoon is Marlene Duley, Deputy Revenue Commissioner for the Water Revenue Bureau. We're pleased to be with you today to discuss the proposed Fiscal '06 Operating Budget for the Department of Revenue. I believe you do have our written.

Yes, we do, so if you want to abbreviate it, we'll give the stenographer your copy and make it all part of the record. COMMISSIONER KAMMERDEINER: Thank you. Our Fiscal Year '06 Operating Budget request has portions in the General Fund, the Grants Revenue Fund, and the Water Fund. In the General Fund, we're requesting an appropriation of $17,658,159. This will support 267 full-time and 4 330 part-time positions and also provides for funding in the other classes that is very similar to the funding provided in the Fiscal '05 budget. One exception is that we this year are requesting money in Class 800 to pay back the Productivity Bank for a loan that was used to implement a system of the payment of tax bills and other city charges via credit card over the internet. In the Grants Revenue Fund, we're requesting $2 million in Class 200 for collection agency payments. As has been the case in the past, collection agency contracts are on a contingent fee basis, and these funds are only expended after collections have been received. In the Water Fund, we're requesting a total of $24,614,645. This supports funding for 285 full-time and 10 part-time positions. And in the other classes actually has a decrease in Class 200 as a result of non-recurring costs from prior years. In Fiscal '05, the Department of Revenue has worked closely with the Mayor's 331 Office of Information Services and several other city departments on the implementation of electronic bill presentment and payment. This permits citizens to view bills and pay various taxes and fees via credit card on the internet. The service was launched in September 2004 and has been well received by the public. For example, water bill payments through the middle of February had totaled $891,000 via the credit cards. And this is a growing area for payments. It's a convenience for customers and taxpayers, and we look forward to being able to expand those opportunities. A number of taxpayers are now starting to take advantage of paying their real estate tax using credit cards, and we're seeing that as a growing way for people who are currently paying real estate tax to be able to access and make payments and develop their own payment plans perhaps. We've also been working very closely with the Law Department on a number of technology-related projects that are designed 332 to improve collections. We've made some changes to TIPS, that's the Revenue Department's integrated tax system and we're able to accommodate some additional activities for the Law Department within TIPS that will facilitate the enforcement of broken payment agreements, reduce manual processing, and otherwise facilitate customer service. We're also working with the Law Department on improving the way we receive and handle information from Bankruptcy Court. The Water Revenue Bureau has been working very closely with the Water Department on sone special projects during the winter shut-off moratorium to revisit properties where the water's been shut off to determine if there's been an illegal restoration of water or if service there should be discontinued because the property is vacant. And we continue to seek ways through that process of adding automated meter readings to those few residential properties that are still without the automated meters. And as you know from prior year testimony, having an 333 automated meter means that the customer receives an accurate bill and it reduces a lot of problems and frustrations for the property owner. As we move into Fiscal '06, we look forward to streamlining some of the tax return and payment processes, continue to work on enhancing revenue collections, and in the area of the Water Revenue Bureau are working with the Water Department and MOIS to develop a new customer information and billing system that we expect to have ready for implementation at the end of the calendar year. This concludes the formal testimony, and we'll be happen to answer any questions you might have.

Thank you, Commissioner. Commissioner, when do the business privilege tax bills -- when are they due? COMMISSIONER KAMMERDEINER: Business privilege tax is due on April 15th.

When has the bills gone out? 334 COMMISSIONER KAMMERDEINER: With business privilege tax, it's not that we send out bills. That's a self-assessed tax. We send out returns that are filled out by the owners of the businesses or their practitioners. And I know we were a little late getting the tax booklets out this year. The vendor we were working through was late sending them. We usually have those mailed out in early to mid-January, and I believe it was well into February before the vendor put them in the mail. The returns were also, though, on the Internet and available to anyone who wanted to access them from there. Most taxpayers use a tax practitioner, and they had access to and were able to start working on returns even without the paper booklets.

How about for people who do it themselves? COMMISSIONER KAMMERDEINER: To my knowledge, those are all out. They should have had them in February.

We were 335 told only today that someone had not received them. So we will certainly refer them to the office. COMMISSIONER KAMMERDEINER: If you can give us the information, we'll certainly see to mail it out. We've been getting return mail, and my office has been working for the search for new or better addresses and has been re-mailing booklets over the last probably month. So I know a lot of them are out on the street and were already coming back from the post office if they were undeliverable.

Thank you. What were the City's collection rate per tax in Fiscal Year 2000 versus 2004 and the projected collection rate for 2006? COMMISSIONER KAMMERDEINER: When you're saying "rate," could you clarify what you mean by rate.

The percentage the taxes that were paid. COMMISSIONER KAMMERDEINER: With the exception of real estate, most of our taxes 336 are self-assessed where we don't know what the amount will be until they file a return. So it's very difficult for us to say what that total amount due would be to be able to give it to you on the basis of a rate.

Well, you can certainly give us the information from 2000 versus 2004. I don't expect you to do that now, but you can certainly give it to us in writing. COMMISSIONER KAMMERDEINER: I will look at what we can prepare and provide for you on that basis.

What actions has your department taken to increase collections? What are the costs of these actions? And what additional revenues have been generated? COMMISSIONER KAMMERDEINER: We've had a special initiative to match additional information against federal returns and to improve our collections or our access to taxpayers who have not paid the City or who have underpaid and have a Philadelphia 337 liability. We recently added a few staff people. I have to get the exact dollar cost of those added staff, but -- I don't want to guess because I'm afraid I'll give you the wrong number. But we've added four or five staff people in our compliance area for some additional projects that are projected to bring in between 3 and $5 million this Fiscal Year and probably as much, if not more, in future fiscal years. There's a very good return on that, because I think the investment is somewhere in the vicinity of 250,000, but I'll get the exact dollar amount in terms of the investment as compared to the projected return. Most of our effort in terms of collection is directed toward use of collection agencies or increased accuracy of bills getting to people early in the process. We work with the Law Department because, as you probably no under the Charter, after 90 days of delinquency, the Law Department is responsible for enforcement and continued action to collect. And so we work with them 338 on the actions that they are undertaking to ensure that the data going to them or going to the courts for certain legal actions is as clearly stated and as early as possible because the best collections come from early enforcement. I can try to add some additional specifics to that as a follow-up.

Can you tell us who you contract with for collections and what are their fees? COMMISSIONER KAMMERDEINER: We've just gone through a RFP process and have just within the last month entered into new collection agency agreements. We have two firms under contract now: NCO Financial Systems and Revenue Collection Bureau. The NCO Collection fee is 14.5 percent, and RCB is 16 percent. RCB, I'd like to stress, is a small Philadelphia firm, minority owned, and a firm that has been a sub in the past and has had some contracts with the Law Department. We look forward to working with them as our primary contractor. 339 In the past we had collection fees that ranged from to percent. And for 4 the collections for water and sewer under the 5 Utility Services Tenants Rights Act, USTRA, we 6 had additional fees on top of those. That's 7 all rolled into these percentages now, so we 8 think that in these most recent contracts we 9 are going to have a much more economical 10 collection process than we've had in the past. 11

The Chair 12 recognizes Councilman Kenney. 13

Point of 14 information on that line of questioning. 15 Would it be possible that we know 16 the principals of the two companies involved, 17 who they are? 18 COMMISSIONER KAMMERDEINER: I don't 19 have that with me, but we can certainly 20 provide that. 21

Thank you very much.

Commissioner, please explain why the Administration is expecting to collect less in 340 Fiscal 2006 than 2005 for prior collections of tax revenues? I believe you mention that on of the budget in brief. COMMISSIONER KAMMERDEINER: I have the budget in brief here. Let me take a look at the reference so I'm commenting on the same thing that you're looking at. You said that was ? Which tax are you looking at?

It appears as though as all the taxes. COMMISSIONER KAMMERDEINER: I'm looking at the current estimate on real estate and see an increase and I see an increase --

No, no. 17 I'm asking why the Administration is expecting to collect less in Fiscal '06 than '05 for prior collections. COMMISSIONER KAMMERDEINER: I'm sorry, I was looking at the total tax not just the prior year. I think it's in large measure because we've had a -- particularly in real estate, we have a new contract under the Law Department for collection of prior year real 341 estate. And generally speaking, when you have a new initiative, you get what typically is referred to as the low-hanging fruit, the things that are easier to collect and you also can go back and get some of the prior year collections that you were not accessing before. Once you get that first and easier collection, it's harder to get that same level of activity because you've now diminished the database that you're going against. You have fewer accounts to collect from because you collected from some the year before. So you start to have some diminishing returns and there's less that you have to go after, and it gets harder and harder to collect against that smaller database. And you also are dealing with accounts that are going to be difficult to pursue. Either the taxpayer has no 20 assets -- you identify the taxpayer but they have nothing to pay with or you find that, particularly in the case of real estate tax, that there is no viable owner. The last known owner is deceased with no apparent heirs. In the course of collection you find that there's 342 no place to go for collection.

When you find that to be the case, what do you do? COMMISSIONER KAMMERDEINER: In the case of real estate tax, we still leaves those receivables available for collection because there's a lien against the property, and should the property sell at a sheriff's sale, should it be in area where there's condemnation activity, there is a likelihood of collection. We would identify it as anticipated uncollectible, but --

Do you notify the Sheriff's Office. COMMISSIONER KAMMERDEINER: If there is a potential of selling that property at sheriff's sale, we will identify for the Law Department the potential of for the property for sheriff sale. Revenue certifies to law. Law in turn does the title search and actually takes properties to sheriff's sale. We also know that from prior history that cases like that will often have a mortgage foreclosure sale and they'll sell 343 through that process. And the --

But you do take action? COMMISSIONER KAMMERDEINER: We do take action.

We just don't allow the property to sit their vacant. COMMISSIONER KAMMERDEINER: I have to say that the sheriff stream is one that's narrow. There aren't too many opportunities there. There's a limit to the number of properties that can go to sheriff's sale. The number of properties that are in the condition that you cite probably exceed the number that can go into sheriff sale. And so it isn't a situation where every property would be identified for sheriff's sale.

We have a number of Councilmembers that would like to be recognized. The Chair recognizes Councilman Nutter.

Thank you, Madam Chair. 344 Good afternoon, Commissioner. COMMISSIONER KAMMERDEINER: Good afternoon.

You had mentioned at the beginning of your testimony about the use the credit cards through the City's Web site. We heard comments actually made by a member about a week or so ago regarding the payment of real estate taxes through the City's Web site. And part of the commentary seemed to indicate that there was -- my recollection is a $18 fee? COMMISSIONER KAMMERDEINER: It's a percentage of the real estate tax, so it vary depending upon the amount of tax that you were attempting to pay. Water and sewer has a flat rate fee. They are actually two different averages for a typical residential small meter accountholder and one for a large meter accountholder. But real estate tax and any other taxes that might be paid via credit card are on a percentage of the total amount that's due.

Why is that? 345 COMMISSIONER KAMMERDEINER: That was what was negotiated in the agreement with the credit card companies. There was an RFP process that the City went through led by MOIS to develop the Web site and the credit card payment facility, and they determined through that process what the fees would be or how the fees would be derived and then the averages and percentages were developed based on the ranges and typical payments that would be received.

Well, is this to cover the cost of processing or something by the credit card company? COMMISSIONER KAMMERDEINER: Credit card processing and the processing that we need to do at our end as well. It's a combination of the two. Most of that fee, though, is the credit card company fee.

Okay. I guess the one thing I am trying to understand is, I mean, it would seem that processing a payment is processing a payment whether you're making a $200 payment whether a thousand dollar 346 payment. COMMISSIONER KAMMERDEINER: Actually, I don't know this in detail, but it's my understanding that the credit card companies do generally charge a merchant, if you're dealing with a merchant transaction, a percentage of the value of that purchase. In government volume transaction, they have agreed that when you have a standard fee for something, some of the records fees, for example, would be a good one to identify where the cost of the item is always going to be $15 to obtain a copy of a particular report. Then they agree to a set figure that is representative of the percentage of the cost of that transaction. They've agreed to water and sewer because we have typical amounts that are in a range and we could set an exact fee there. Otherwise, they charge a percentage.

Okay. The last time you were here, it may have been Five-Year Plan time, I asked you for a list in the morning and then you came back in the afternoon for outstanding taxes by tax type. 347 COMMISSIONER KAMMERDEINER: Right.

Which I did write down. Have any opportunity to put that list in writing with a break-out of both the collectable and uncollectible and if there are any other taxes? COMMISSIONER KAMMERDEINER: That information was put together and provided through budget and I thought had already delivered to Council.

It's quite possible that it may have come through the system. I was just asking. Do you know if water revenue was on that list as well? COMMISSIONER KAMMERDEINER: Yes.

Do you know what the figure is of outstanding water bills? COMMISSIONER KAMMERDEINER: Give me a moment. I have it here.

Because I don't think I asked about that at the time. COMMISSIONER KAMMERDEINER: You had asked that we include it in the written 348 presentation.

Your memory is better than mine. COMMISSIONER KAMMERDEINER: I have so many papers with me, if you'll bear with me a moment I'll find the right one.

That's all right. COMMISSIONER KAMMERDEINER: I know it's here.

Why don't we come back to that one. COMMISSIONER KAMMERDEINER: My apologies. I know it's here. I just brought too many pieces of paper with me.

I understand. I have some experience with that. What's the total number of wage taxpayers for the City? COMMISSIONER KAMMERDEINER: That would be the employers, and I will have to check to see what it is now and get a number for you. In addition to the accounts with employers do have accounts with what we refer 349 to as earnings taxpayers who are the individuals whose employers don't withhold. I have to get both numbers for you because that will give us the complete picture on how many --

When you say the employers, can you be a little more explanatory? COMMISSIONER KAMMERDEINER: The accounts that we maintain for the wage tax are those for the employer who withholds the tax from the individual's pay. We don't have a -- for example, we don't have separate accounts for every City employee. We have an account for the City of Philadelphia withholding the wage tax for all of the employees of the City of Philadelphia. And so the number of wage tax accounts will be much smaller than the number of individuals who are paying the wage tax.

But I guess my question is, do we know at any point in time how many people, individuals, are actually paying or are supposed to pay the wage tax? 350 COMMISSIONER KAMMERDEINER: The annual wage tax reconciliation that's due in February includes as a part of it a question for each employer to answer in terms of how many resident and how many non-resident employees they are reporting for on a specific date. And I have to say that not every employer properly fills that out. And so the information that we have is not as accurate as I would like to see it to be able to give you a full number there on the number of people who are paying wage tax.

So at any point in time, we don't know the exact number of people who are wage taxpayers? COMMISSIONER KAMMERDEINER: That's correct. We have an estimate, but we don't have an exact number. We've used W2s to try and -- because they are to give us copies of W2s at the time they file the reconciliation, and many of them do provide a W2s in an electronic format. That give us an opportunity to look at that closely. But a lot of that comes in paper form and is 351 difficult to handle and process, so we have an estimate but not a precise figure.

Now, with regard to the state or federal governments, I mean, pretty much like clockwork, and I understand that city residents, unlike maybe a resident maybe New York City or something, I understand that city residents don't fill out a city tax form. COMMISSIONER KAMMERDEINER: That's correct.

Like a 1040 or -- I don't remember what the state's form is. COMMISSIONER KAMMERDEINER: PA40.

PA40. But that appears to be a direct relationship between, say, for instance, myself and the Commonwealth or myself and the federal government. So those governments, I would take it, would know how many residents or citizens -- I assume if you're a non-resident in Pennsylvania but maybe work here or have a business here, you probably have to pay a tax. Why is it that we don't have, putting aside whether people fill 352 out a form or not, why don't we have a direct relationship or a, quote/unquote, account for each wage taxpayer? COMMISSIONER KAMMERDEINER: There's a difference in the way the law is constructed.

Utilizing their social security number or something. COMMISSIONER KAMMERDEINER: There have been proposals or thoughts from time to time that we should have a Philadelphia personal income tax that would include, as does the federal and the state, both earned and unearned income. Because we do have an unearned tax for the School District. And so there have been proposals to actually have returns that are filed. But until recently with computer technology at the state it is today, the paper handling and logistics having returns from individuals who don't owe us anything, there's no reconciliation for them because their wages are taxed at a percentage of everything that's earned. So there's nothing to reconcile. When you're dealing 353 with the state and federal government, there generally are deductions or other things that come from it and the amount you owe is not necessarily just the straight amount that you had deducted from your pay in the first instance. And so there was a reason for that paper return. We did not have a reason for a paper return since the full amount that was due to us was being withheld; and with minor exceptions to that, not that many refunds that would be due to anyone. Computer technology may make it that we should reassess that and see whether or not there's something to gain from the additional handling. But it would mean a substantial amount of additional handling of returns, given technology, though, and perhaps having a lot of people filing on-line might make a difference.

I was just going to say unless you allow people to file 22 electronically. COMMISSIONER KAMMERDEINER: As we get to a better state with technology and more and more of our citizens are using the 354 Internet, it might be more effective to be able to do that. It wasn't cost effective in the past.

Thank you. Thank you, Madam Chair.

Thank you. The Chair recognizes Councilwoman Brown.

Thank you, Madam President. Good afternoon, Commissioner, Deputy Commissioner. COMMISSIONER KAMMERDEINER: Good afternoon.

I would like to start off with an old issue. I pulled last year's testimony around the new start provision, a business privilege tax bill that we were successful in getting passed November 2002. And you recall during those hearings last year letters were sent to you by both our City Controller Jonathan Saidel and myself indicating our interest to at least get the new start provision implemented and executed. 355 Where are we with this initiative? And let me just remind you that last year you indicated -- I want to be specific -- that there were constraints related to adequate personnel and hurdles related to technology and you were try to find a way to do it in a way that was fiscally responsible. So where are we now with this particular measure? COMMISSIONER KAMMERDEINER: I think what you're referring to, Councilwoman, is the ability to have more than one payment instead of having a single payment for the --

New start-up businesses who -- COMMISSIONER KAMMERDEINER: Well, it's not just new start, it's for everyone. Because really new start doesn't exist anymore as a separate category or a separate entity. All taxpayers are now paying business privilege tax for the prior year. So that when you file your return on April 15th of 2005, you're filing for 2004. And that change, which was the major focus of the 356 change in the business privilege tax a couple years ago, has been in effect for -- this is now the third filing year with the tax being paid on a retrospective basis instead of a prospective basis. So we have implemented that and that's been under way. The concern that you were raising last year was that because we were now requiring an estimated payment at the same time as the reconciliation for the prior year, for a new business they now have the prior year's tax to pay because they didn't have any credits of prepayment and the estimated amount for the next year. At the time we talked last year, I was hopeful that we would be able to do something there. We have continued to have a decline in our staff and the ability to deal with new projects, new ideas, and also we've been fully engaged with bringing real estate tax into our integrated tax system and the things that needed to be done after that. Our programing resources have been stretched. In fact, we've lost staff in the programming area as well as in other areas. 357

And so the short answer to that is? COMMISSIONER KAMMERDEINER: The conditions that existed last year continue to exist. In the 2005 tax filing for 2004 are still using the single payment approach. I still understand and sympathize with the concerns that are out there, but we have not been able to change the way we handle the process.

So where does this stack in terms of priorities or a to-do list? COMMISSIONER KAMMERDEINER: I would say that, again, it's something we want to explore. We're certainly willing to talk with those who have ideas on how we might be able to carry it out. And we'll try to have a full assessment of it during the course of this coming summer so that we'll know with the returns that are to go to the printer next fall.

And when you say you're willing to explore with those who 358 have ideas, whom would you be referring to? COMMISSIONER KAMMERDEINER: Well, quite often practitioners who deal with the filing of returns for a number of businesses, because of their work with those businesses and also with the returns and the tax law, will have ideas that will help us think through a process and figure out how to make it work. I meet with some of these tax practitioners, both lawyers and accountants on a quarterly basis, and they've been helpful in the past. But it's not just this small group who meet periodically, anyone who's involved with the tax, it could be an individual taxpayer who might have an idea or suggestion. I'm open to hearing about ideas about of how we can implement a two-payment process that would mean something to the taxpayers and not be two payments that are so close together that it's not really a meaningful help to them, but at the same keep the payments in the fiscal year so that we don't adversely affect the City's budget.

So formally, 359 how can we make that happen? Because this is 2005. The bill was passed 2002. You guesstimate that we can have something in place 2003. What tangibly needs to happen between now and you say the summer so you have adequate time to prepare the printed documents so that they go to the printer and available for taxpayers? I guess that would be this winter, right? COMMISSIONER KAMMERDEINER: They would go to the taxpayers in January of 2006.

How can the Council be helpful in getting this done, when you say you need practitioners and the like? COMMISSIONER KAMMERDEINER: As it stands right now, without some way to get this revenue neutral in the budget year, the process that is in place now would continue because we have implemented the change in the law as it was contemplated back in 2002.

But my interest remains for new start-up businesses whom we know have to overcome a lot of hurdles just to remain in business. 360 COMMISSIONER KAMMERDEINER: I can't give you a set process because we're looking for an idea that hasn't come yet. So I'm open to ideas on how we can make this budget year neutral at the same time we're helping these people. So far, the ideas have been proffered by, whether the's my staff or someone from outside, would put us in a situation where it would delay into the next fiscal year, and that doesn't help from a budget standpoint. So I can't give you an exact time because it means having someone come up with an idea that hasn't come forward yet.

Okay. For this year, I'll go on the record indicating that that is a concern. And next year we'll have a different conversation if there has not substantial movement. Thank you very much for your testimony. Thank you, Madam Chair.

You're welcome. The Chair recognizes Councilman 361 Rizzo.

Thank you, Madam President. Not everybody thinks, Commissioner, that this is bad, but we've had this conversation before and I can't figure why we can't do better. Example: Someone pays the real estate taxes. They send the check in. And they're conditioned that when they pay the electric bill, they pay the gas bill, they pay the phone bill, within a day or two, the check clears. I have people tell me that they've paid their real estate taxes and other taxes to the City where the check's out there three or four weeks. And I know you explained to me that the checks all come in at once and it's a cumbersome process, but other big companies get lots of checks every day and process them promptly. I just can't figure why a person would have a few thousand dollar check for real estate taxes coming to the City of Philadelphia and it doesn't clear for a month. COMMISSIONER KAMMERDEINER: I don't understand that either because we don't hold 362 them in my procession. Real estate checks are going through, if not the same day, within a day or two of when we receive them based on what is in our possession. So I'm not sure -- I'd love to have the example.

But you gave me a different answer. COMMISSIONER KAMMERDEINER: When we talk about business privilege tax, that's a different story. Business privilege tax payments come in envelopes that ar more difficult to open. They're in between pages. The business privilege tax payments, I understand, do take us longer to process than I would like to see. Those take two to three weeks and sometimes a little bit longer. What could have happened with the kind of situation you're referring to with real estate taxes is if we got a check that did not include a payment coupon, we have to research those individually to figure out what that payment applies to and that takes time and those do back up and those do take sometimes two to three weeks to clear. And 363 that's generally because we haven't had a payment instrument with that check that gives us the information we need in order to post that payment to the proper account. And those will wait until --

I will give you some examples of payments that were posted according to the book, that were not lost in the mail, never came back, that weeks and weeks and weeks went by before the check cleared. I've asked other people the same to do some checking, and it takes a long time. You're telling me in a day or two. You have to show me, and I'll show you. COMMISSIONER KAMMERDEINER: I would love to see the example so that we can research them because I would submit that the vast majority of them are processed quickly.

The reason I started off by saying it, it's not a big deal if you don't want my money and get it in the back quickly. I'd rather have it in my account, but I can tell you this, it sends a message that we don't do our business well 364 here when someone sends a check and it sits and doesn't clear their account. I don't want to be labor this, but all I can tell you is that there's a lot of people that I know that have told me that it's taken a long time for you to cash their check. COMMISSIONER KAMMERDEINER: Again, I would like to see the examples so that we can take a look at that. And I'd like you to come see and processing area so that you can see what the process is like.

I'll show you one in particular that took three weeks. COMMISSIONER KAMMERDEINER: Thank you.

The next thing I'd like to ask you about is, what do we do -- you talked about the automated meters. The life expectancy of the battery in that meter is how long? COMMISSIONER KAMMERDEINER: Those are actually handled by the Water Department. And I'm guessing here. I was thinking five years, but I'm not certain. 365

Is there a program to let people know that they have to come back out? Because I had a constituent call me that somebody was knocking on their door and they thought it was one of these scams to get in their house to replace the battery. COMMISSIONER KAMMERDEINER: There is a program to replace the batteries. And basically, as the water reads come in, there will be no reading. The battery doesn't activate, there will be no reading, and those are investigated by the meter shop to determine whether or not there is a battery that needs to be replaced. I personally have had a battery replaced on mine. It stopped reading, I was getting an estimated payment. I raised a question because my reading was estimated instead of actual. And when they investigated, it had just come up and they scheduled it and my battery was replaced.

But I hope it's not just a knock on the door that someone shows up and says, "The battery is deed in 366 your meter." I hop there's some letter or some communication to the people to schedule a time or appointment. COMMISSIONER KAMMERDEINER: That's handled, as I said, by the Water Department and the water meter shop. We'll make sure that they provide an answer on that question.

That's good. I want to talk about an area that I have an interest in, and it is satellite television in the City of Philadelphia. We're working on looking at exactly what they do and what they don't do in the area of sales tax. I'm not sure what the situation is right there. But it's been reported to me that many of the vendors, they're small contractors that work for these satellite television people that go out and put the dishes all over Philadelphia, that many of those companies come from outside the City and they have no 22 business privilege license. How does revenue manage that? In other words, can you report to me how you are assured that vendors that come into the City, especially at this level 367 putting these satellite dishes, there's two major companies, all over the City and if they're coming from New Jersey or they're come from outside the City doing this work, A, they don't have business privilege licenses and then no business privilege tax. That would be an assumption, right? COMMISSIONER KAMMERDEINER: In order to get a business privilege license, you have to have a business tax account with us in Revenue. So those two things are linked. We work with L&I on that. We would know about the taxpayer and have them registered to be doing business in Philadelphia if they've gotten a business privilege license. The broader question that you're asking is how do we know about someone, whether it's the satellite installer or someone else who's doing business here who isn't located in Philadelphia. That's the difficult compliance issue that we deal with regularly. And we do, through our compliance group, seek to review things like the satellite installers, whether it be through 368 listings in phone directories, listings that we get through cooperation with either the Internal Revenue Service or the Pennsylvania Department of Revenue and match those pieces of information against our records to see if they're registered. The hardest group to find are those who are located outside the City so therefore aren't filing from a Philadelphia address with the other levels of government and are working here. And so I would say we don't have a hundred percent compliance. We keep seeking ways to identify them. And this is a group that I will check with our investigators to see if they they've looked specifically at this group as a distinctive group of contractors who might not be properly registered.

The issue is the fact that when you call and you want to get satellite television, whether Direct TV or Dish Network, you call an 800 number and the installer shows up. That concerns me that that revenue that we're losing. Is your department in a position to 369 write a letter to both of those companies asking them to provide you the list of installers that install their product in the City of Philadelphia and then we can identify whether or not -- they're all subcontractors, from what I understand. And I got a complaint from a particular person that said that the person that showed up at their location did not have a business privilege license. COMMISSIONER KAMMERDEINER: We certainly would be in a position to seek that information. Not every entity that is outside of Philadelphia is going to be willing to comply with us.

I'm not talking about the subcontractor, I'm talking about you writing a letter to Direct TV asking them for information on who their vendors are in Pennsylvania or New Jersey. COMMISSIONER KAMMERDEINER: And what I'm saying is we can and we certainly do on many occasions go to entities like that. But Direct TV, for example, is not located in Philadelphia, so they may or may not feel that 370 they have to comply with our request.

Do we get any sales tax from them? COMMISSIONER KAMMERDEINER: Sales tax is collected by the state on our behalf. So I can't directly answer that question.

Could you find that out. If they're conducting business in the City of Philadelphia, wouldn't you think we should be getting sales tax? COMMISSIONER KAMMERDEINER: I believe that is a component on a bill for a satellite subscriber. What I can verify, because of confidentiality, I wouldn't be able to give specifics even if I can verify with the state that a particular entity business entity is paying a particular tax.

That's confidential? COMMISSIONER KAMMERDEINER: Yes.

It's confidential on a bill that was sent to me, it sales tax. It doesn't say whether it was Pennsylvania 371 sales tax or it could be where their corporate offices are, correct? COMMISSIONER KAMMERDEINER: It could be.

And it's confidential whether a company pays sales tax to the State of Pennsylvania? COMMISSIONER KAMMERDEINER: For one thing, I don't even have access to the full state information. The state collects on our behalf and we get it in bulk. I don't have audit or --

Point of information.

Excuse me. The Chair recognizes Councilman Nutter for a point of information.

Thank you, Madam Chair. Commissioner, in line with Councilman Rizzo's question, I mean, maybe there is an argument as to whether or not you or someone else could tell us whether XYZ Corporation was paying a particular tax. Not 372 today, but be glad to spend the time debating with you about that. But certainly, you could tell us or someone could tell us whether a company like XYZ or a company that is in the business of providing certain services as described, whether it's satellite dish or whatever the case may be, that can't be confidential. COMMISSIONER KAMMERDEINER: Correct. I was responding that way because I thought the question had been about a specific business. And that specific business, I couldn't provide the information.

How about if the question is rephrased and it's a business that's in that kind of business? COMMISSIONER KAMMERDEINER: Certainly that can be checked. It's really the State. I will who have to check with the State to see whether or not the satellite coverage is subject to the sales tax. And if it's subject to the state sales tax, it's subject to ours because ours is a subset or a mirror of the State's in terms of 373 requirements.

Thanks. Thanks Councilman.

So I'd be interested to know about what we can do to make sure that these installers that come into the City have business privilege licenses, that in fact we are collecting the business privilege tax. And then that generic question of whether or not satellite providers pay sales tax to the Commonwealth of Pennsylvania which we get a piece of. COMMISSIONER KAMMERDEINER: I can't tell you whether our investigators have already been pursuing them, but to the extent they have not, we will certainly be looking at if these companies as we go forward. And I will check with the State about the taxability sales tax for the satellite coverage.

From what I understand, unlike other cable companies, most of the satellite companies have subcontractors that install their product. I'd be interested to know what we're doing there to assure that 374 we're having quality people install that have the business privilege license and also pay their tab. COMMISSIONER KAMMERDEINER: When you say quality, I don't know whether they're required to have licenses, and that would be an issue in terms of L&I.

Thank you, Madam President.

You're welcome, sir. The Chair recognizes Councilwoman Tasco.

This question may have been asked, and I just want to see if I heard you. What continues to bother me is the fact that there are buildings, properties in the City of Philadelphia where we're not collecting taxes. They owe city taxes and we're not collecting them. Now, did you say you pass that information on to the Law Department for action? COMMISSIONER KAMMERDEINER: The Law Department under the Charter is responsible 375 for enforcement after 90 days of delinquency. We work with them and we do continue to collect and we do continue to bill and try to collect as much as we can even after that 90-day period. But in terms of legal enforcement and additional steps, that is handled by the Law Department. They may be going to Municipal or Common Pleas Court. They maybe filing judgments against the taxpayers. And they may be taking other legal enforcement actions with a property. That could mean sheriff's sale. It could mean an outside collector. There are a variety of enforcement actions. They also have a program involving sequestration when there's rental income. There are a variety of things that the Law Department does for enforcement over and above the things that we're already doing with collection agencies, billing, and matching to other databases. So there are really two sets of activity going on. And you may want to talk with Law a little bit further about the details on the things that they're doing for further enforcement. 376

Thank you.

Thank you. The Chair recognizes Councilman Clarke.

Thank you, Madam President. Good afternoon. COMMISSIONER KAMMERDEINER: Good afternoon.

A couple of quick questions. I'll start with a bill that I introduced, the abatement on gross receipts on new businesses that is currently before us -- COMMISSIONER KAMMERDEINER: Yes.

I wanted to ask a question. There was some references in the City Solicitor's opinion about this particular bill as it relates to uniformity. And it was language that talked about new businesses versus start-ups. What's the difference, in your estimation? COMMISSIONER KAMMERDEINER: I'm not sure that I've seen the opinion you're 377 referring to, but I believe what they're referencing there --

You've seen the opinion? It's supposed to be confidential. COMMISSIONER KAMMERDEINER: I'm not sure I have.

You shouldn't have that. COMMISSIONER KAMMERDEINER: I think I saw a draft. I'm not sure I have the final.

You probably don't want to say that on the record. Let's act like you didn't say that. Say that you understand what I'm talking about. COMMISSIONER KAMMERDEINER: I think what the reference there is to a business that may change its entity. You can have a proprietorship that becomes a limited liability corporation. It may be doing the exact same business, but changes it changes its legal form. That type of business gets a new entity identification number from the federal government. It gets a new tax account from us. It appears on our records as though 378 it's a brand-new business. It has a start date of whatever that new start date was for that new entity. And yet it may be doing exactly the same things in the same place with same people as it was before. And I don't think that you intend your bill to address a company like that that has a longstanding history but has a legal entity with a new tax account. And somehow we have to be able to distinguish between a company that truly is new, wasn't in business in Philadelphia before. It may have been in business somewhere else, but not in Philadelphia before. And the company that was here before but has a new legal entity that on Revenue's records have the start date and looks like the same new corporation. And when you try to distinguish between those two, you can come up against the uniformity provisions in the State Constitution. And under Constitution, taxes must uniformly applied to the same type of entity.

You've truly read the opinion, because I didn't really ask 379 all of that. I asked you the question, what's the difference between a start-up and a new business. And you started going down that road and then you got into what was referenced in the opinion. Basically a newly incorporated business that has no history in any other parts of the country, any other state -- if you could just respond to the question and not get into what was in the opinion. I only referenced the opinion because I was giving you a reason why I was asking the question. COMMISSIONER KAMMERDEINER: I'm not referencing the opinion.

The language you're quoting is verbatim. COMMISSIONER KAMMERDEINER: Truly coincidental.

I didn't ask you about uniformity and all that. COMMISSIONER KAMMERDEINER: I'm saying it becomes an issue then when you're trying to define what is a new business, you have to be sure that however you can define it 380 is one that we can enforce under the law, and the law --

Let me ask the question this way. Do you have a definition in the Revenue Department as a start-up business? Is there such a definition? COMMISSIONER KAMMERDEINER: No. 9

That answers my question more so. Because there was some recommendations -- now we can talk about the bill -- as it relates to the bill that we should amend it to incorporate start-ups. My preference is to do new business because I think new business need some exemptions on gross receipts because new businesses, like all businesses -- COMMISSIONER KAMMERDEINER: I think the concern is, what are you defining as a new business and what characteristics are there as a new business. Because I could define a new business as one that's newly registered with me with a new identification number and then find out that that same business, that that entity existed in a different form with the 381 same people in an earlier time period and yet on my records in Revenue it would look like a brand-new business with a new account number from us, a new federal ID and new name, but yet it's the same as what was there before.

What level of detail do you investigate the new business? COMMISSIONER KAMMERDEINER: We don't care.

Because there's no difference in terms of the taxes? COMMISSIONER KAMMERDEINER: They would need to register with us when they have a new legal entity. It doesn't matter whether it's a similar entity to another one or not. A typical example, you might have a developer who for every development or every project in the City has a new legal entity and new identification and yet the partners could be exactly the same.

So it sounds like you're suggesting that we should ensure that the partners in a new start-up essentially can't have had similar business in 382 prior years? COMMISSIONER KAMMERDEINER: It depends on how you want to define a new business and what it is you're attempting to achieve. You need to be precise about that in a way that we can apply that same standard to every entity and treat them similarly.

So there's really no difference in a start-up and new business as defined by the Revenue Department? COMMISSIONER KAMMERDEINER: We don't define them, so no. We look for the date that you start doing business in Philadelphia, and you declare to us what your name is, who your officers are, and identify your federal identification number. It's possible -- and I don't know the answer to this -- whether the Feds have any distinction in terms of assigning the new number.

All right. Second question. One of our favorite subject matters. Non-utilization tax. We talked about it earlier, and I think we may need one of our friends from MOIS to 383 come to the table. COMMISSIONER KAMMERDEINER: David Baldinger from MOIS who deals with the data and GIS issues agreed to join me after a side conversation with the Councilman earlier today.

Thank you. Good afternoon.

Good afternoon.

Pretty much, I guess, for the last three years we've been having this dance around non-utilization tax, essentially a tax on vacant property. And one of the primary issues raised by the Revenue Department was always the ability to determine accurately whether or not a property was vacant, no utilities, haven't been used in a number of years, no action whatsoever, no 20 utilization whatsoever in that property. And my understanding in talking to a number of people in recent years that we have the ability relatively quickly to determine the history of a property, particularly if the property is vacant and there have been no 384 utilities or no activity with that building whatsoever using technology as opposed to sending out an L&I inspector and physically inspecting the property. It was suggested that possibly we're in a position to do that now.

The systems we have in place for geographic information systems enable us to look at data from a lot of different sources and try to understand, analyze that data and understand what is happening with individual properties. The question of whether properties are vacant is a very difficult question, as you know, Councilman. And there are not really good primary data sources for vacancy within the City. What we do get about vacancy are a snapshot of vacancy from L&I when they do periodically a vacancy survey of the City, but that's really only a snapshot of whether properties are vacant at an individual point in time.

Let me stop you there. When we proceeded or the NTI Program 385 was proposed and they identified the number of properties that were vacant in the City of Philadelphia, where did they get that number from?

They got that from L&I. As I understand it, L&I went out, did the survey, sent all of their inspectors out, rode up and down the street and said, "That's vacant. This is not vacant. That's vacant. This is not vacant." And even then, as you know, it's often very difficult to tell from outside a property whether it is in fact truly vacant or not. You know, somebody's making a judgment. It's obvious in many cases, but in some cases it's not so obvious. So it is difficult. There is not a business practice within the City where you can go to one agency and they know on a day-to-day basis whether a property is truly vacant on that day. It just doesn't exist.

Can we determine if the property is being utilized?

N, we really can't. 386 Utilization and vacancy are kind of the same thing. There are some --

Not to cut you off. So if a squatter is in a building illegally, we don't consider that building vacant?

If it was obvious that that building used, if the squatters were in there in a way you could see that they had curtains up and they were using the building, the L&I inspector as I believe as they looked at that building would say that's not vacant. They would have no way to know as they were driving up the street whether the person in that building was there owned the building, was renting the building or was there perhaps illegally.

If there are no 20 utilities in the building, there's no gas service, there's no water service, there's no 22 electric service --

There are other --

Wouldn't that mean that the building is not being utilized? 387

Well, you're right. There are other ways to kind of make estimates or get indications of whether properties are being used or not. And you're right, looking at utility data, you know, has the Water Department cut off the water service to the building, those kinds utility data can be used to kind of supplement the other data. But it's not a comprehensive nor necessarily perhaps a conclusive way to really know exactly what the status of that property is.

So if there's no 14 services whatsoever in the building, taxes are not paid, no water service, no electrical service, no service whatsoever, we can't identify that building as being vacant?

You probably in that case, you would come to the conclusion that that property was vacant.

So my original question, through MOIS, do we have the capability of determining all the aforementioned services?

If we were able to 388 get the data from the various utility companies. If you wanted to look at more than just the water data, if you wanted to look at PECO data or PGW data, you have to see whether that data could be made available. If it could, you would be able to take that data and compare it to other data that we have within the City and you could make judgments.

You're telling me you don't have the capability of determining that?

The technology is there. It's not -- we don't have all of those data sources. We would have to develop a mechanism to make sure that we were analyzing the data correctly. It could be done.

Which ones don't we have? I'm assuming we have the ability to access water.

Yes, we would have the water data, but I don't believe we have data from either PGW or PECO if you wanted to look at those data.

Why wouldn't we 389 have PGW?

I don't think we've asked for it. I guess we could ask for it.

It is owned by the City of Philadelphia.

If they would make it available, we could look at it, yes. COMMISSIONER KAMMERDEINER: I know in the past we had attempted to share databases. This is prior administration of PGW, so I can't say what the result would be now. But when we attempted to share information before, we were stymied in the course of doing it.

Hold on. The prior administration in PGW? Don't we own the gas company? COMMISSIONER KAMMERDEINER: We own the assets, but the management several years ago did not cooperate with our efforts to do some joint enforcement.

That was PMFC or whatever it was? COMMISSIONER KAMMERDEINER: I'm 390 going back probably six, seven years. I personally have not been involved in any effort since then in terms of acquiring that data, so I can't personally tell you whether it would be made available to us. We would need to be able to find a common key to be sure we were matching addresses effectively. And I don't know enough about their database to be able to tell you whether we could easily match it to our data and superimpose that over the information that we already have in the City. We could probably do it, but I can't tell you without doing some further investigation.

The system that's used by the University of Penn, are you familiar with that?

Yes, I am.

Don't they have gas service in that system?

I don't know whether they have gas data or not. They get data from the City and they also go out and get data from other sources. They may get it from the 391 gas company; I don't know.

A guy in my office actually pulled up a property and he was able to get that information.

If he was, then I would suspect we would be able to get the same.

The only one we wouldn't be able to access is PECO basically. COMMISSIONER KAMMERDEINER: I don't know whether they will share it. We've not approached them about doing it.

Can we do that? COMMISSIONER KAMMERDEINER: We can certainly approach them. I don't know whether they would share it.

Yes. Should I do it or you do it? COMMISSIONER KAMMERDEINER: We can initiate something, but we might need your help.

I've been trying to get some assistance from you guys for the last three years. 392

And I'm sure that Councilwoman Tasco would be more than happy to lend her support to that. I mean, there's no 5 reason why we shouldn't be able to obtain that information.

I was holding back the big stick for a little later.

Point of information.

Councilman Rizzo.

This isn't the first time we talked about this reaching out to the various utilities. I believe we were told that -- I forget who in this body suggested that we do use the gas company, the PECO records, I forget what the issues we were discussing, the cable companies, to ascertain something that we wanted to. And I believe we were told that that was privileged information. Do you recall the issue that we were discussing here possibly using the information about the credit or -- COMMISSIONER KAMMERDEINER: I don't 393 recall the situation. What we're talking about now is specifically information on vacant properties which might be more readily shared than information that would involve the credit or liabilities of a particular customer.

I think it was about abandoned buildings for water service. I think that that's what the issue was that we were talking. We had so many active accounts and we were trying to figure a way how we could find out which ones needed to be totally disconnected, and there was some effort to try to use records from PGW. Are you starting to recollect now? COMMISSIONER KAMMERDEINER: I referenced before that we were stymied in our efforts to compare data and do some joint enforcement.

I'd like to revisit that. It doesn't sound like it's confidential to me. It's not finding out who pays sales tax or not. COMMISSIONER KAMMERDEINER: We can 394 and should revisit the issue and see what we can get this time around.

I recollect it was about that issue. Thank you.

Councilman Clarke.

Thank you. So right now, potentially, the only utility that we, the City, would not be able to access is the electrical service, assuming we can get gas and assuming we can get water?

Definitely we have the water information. We have to verify that we can get PGW information in a format that we could use, which is always an issue. Presumably, we should be able to get that.

So if we were able to get the information on the electrical service, you can then determine pretty much what the -- short of a physical inspection, and we agree that sometimes a physical inspection doesn't determine specifically, an exact science, that that property is vacant, but we would have a good barometer that that 395 property is probably not being utilized if there are no utility services whatsoever in the building?

That's correct.

To follow up, Ms. Kammerdeiner, you will have your people or somebody will check and see if we can have some access to records on service by PECO? COMMISSIONER KAMMERDEINER: We'll see what we can learn, yes.

You'll see what you can learn? COMMISSIONER KAMMERDEINER: In terms of getting access to the records. We'll check into it.

Can you notify me as to the response you get? If it's a positive response, can we then work on trying to determine if the technology will allow us in expeditious way to determine the status of these properties? Can I at least get that agreement from you today? COMMISSIONER KAMMERDEINER: We'll certainly get back to you as soon as we have 396 some information on it and then we'll continue to work with MOIS.

All right. Thank you. Thank you, Madam President.

Councilman, I was just saying to Mr. McPherson, I don't see any reason why any of us should not be able to get all of that information on our computers really.

I know the PGW is available because I had a guy check a property and the water came up and the PGW came up. It told the time when the service was terminated and everything. And I just off the top of my head, I can't remember if the electrical service was included, but I'll check when I go back to the office.

The Chair recognizes Councilman Nutter.

Thank you, Madam Chair. Commissioner, I'd like to go back to the -- I'd like to get a better understanding. 397 If you need to provide us a document, that's fine. I'd like to get a better understanding of the credit card issue and the agreement that was made. In many other on-line transactions, if you're buying books, if you're buying an appliance, I mean, any number of things that you can currently purchase on the Internet or pay bills through your bank, you set it up or you tell them who you want to pay, put in all the information, and you pay the bill without any additional charge. So I'm trying to understand. There must be some benefit to the City by making it easier for people to pay any number of bills or access things over the Internet. So why are we charging? COMMISSIONER KAMMERDEINER: The other types of bills you're talking about with a retailer, that retailer is paying the fees. They're absorbing the fees. If you go into a store and you use a credit card in the store or you pay for something over the Internet, the retailer involved is absorbing that fee and paying it to the credit card provider. 398 Governments generally do not absorb those fees. The general feeling -- and I'm using that statement because I've read a number of articles about other governments and the deliberations they went through in this process. They generally do not absorb the fee. They have the user of the service pay the fee because there is a perception that in general the taxpayer shouldn't be paying for a service that's used by a few.

Used by what? COMMISSIONER KAMMERDEINER: Only a few. And that we should not have that charge paid by the general treasury for service that is used only by a few people and that those people should pay for that.

In this context, what's a few? COMMISSIONER KAMMERDEINER: I think that is an issue that almost every government will deal with at some point in time in terms of when it becomes beneficial to the government to absorb that fee and have it be out there as something that we pay for as 399 opposed to something that the individual user of the service would pay for. That definition may be different for every type of service in every situation.

Now, you mentioned that the fee is a function of how much you pay. Is this a percentage issue or is it a dollar amount issue? COMMISSIONER KAMMERDEINER: Usually it's a percentage. When you have a lot of volume of activity that is for the same dollar amount, then generally the provider of that credit card service will agree to a set fee that goes with either that dollar amount or a range of dollars.

Well, what's the percentage fee that we've negotiated? COMMISSIONER KAMMERDEINER: I don't want to misquote, so let me get that for you and verify it. It's, I think 2 and a quarter percent, but I'm not sure.

How much? COMMISSIONER KAMMERDEINER: It's around 2 percent, but I'm not sure. I said 2 400 and a quarter, but I don't misspeak, so let me get the fee.

So whatever that number, it's that number times however much you're paying; is that right? COMMISSIONER KAMMERDEINER: Yes.

Now, does the City make or generate any revenues from this arrangement? COMMISSIONER KAMMERDEINER: Again, I'll get the exact amount for you. There is a small amount that comes to the City for the processing charges that we incur in terms of actually implementing the service. It's a few cents on each transaction.

So in the example earlier, if a person paid their bill 19 and there was a $18 charge, how much of that goes to the credit card company and how much comes back to the City? COMMISSIONER KAMMERDEINER: That's the kind of thing I have to get for you so that we have a clear picture.

Now, what is the 401 benefit to the citizen to pay on-line, end up with, even if it is 2, 2 and a half, and a quarter, whatever the number is, pay a 2 and a half percent or so fee, which on a fairly large bill could be some amount of money, versus getting a stamp and putting it in an envelope and writing a check? COMMISSIONER KAMMERDEINER: That would be for each person to determine. I know that a number of people will pay --